francine: a sea of red as european stocks are lower. one of the worst decembers on record. an embattled theresa may continues talks with the e.u. nd as the market waits for powell, stanley miller gives us his take on what they should do as president trump piles on the pressure. >> i could not agree more that it would be horrific if the fed ere to pause because they were bullied by donald trump. i also want to say that it would

be horrific if the fed didn't pause because they were afraid people would think they were being bullied by donald trump. that would be just as political s the first outcome. francine: welcome to bloomberg "surveillance." these are your markets. a little bit of pressure on the stoxx 600. down some 0.6%. over all. a lot of the pressure we saw in u.s. equities trying to play into some of these futures. seems like the rest of the world is catching up with the route that we saw in the u.s. also getting a little bit of breaking news of out germany and we also have the december german business confidence coming in at 101 instead of the 101.7 that we were estimating.

business confidence could have to do with concerns about trade. over all i'm seeing a risk off kind of mood on the markets with the japanese yen advancing. gold os signing as a risk off. exclusive xt, an interview with drukenmiller. now let's get straight to the bloomberg first word. >> exin ping says china will stick to its policy agenda. allowing more competition. 40 years since the rosm is opening up. ecutive xi said it was a turningpoint for the nation. he stresses commitment to the multilateral global trading system.

>> reform is opening up is a great reawakening of our party. ne that nurtured great creativity in theory and ractice for our party. >> u.k.'s theresa may has given herself another four weeks to save her brexit deal. may announced the deal will be finally put to a vote the week of january 14. jeremy corbyn has proposed a motion of no confidence in may as prime minister. he said she has evaded accountability for too long. >> the prime minister has run down the clock trying to maneuver parliament into a chice between two unacceptable outcomes. her deal or no deal. the country workers and businesses are increasingly

anxious. francine: the board of u.s. television network cbs has denied a $120 million severance payment to former chief executive officer les moonves following ack indications of sexual harassment. cbs said he failed to comply with an internal probe. he was responsible for willful malfeasance. moonves denied any nonconsensual acts. four separate company also head space.bit, it will be the first time so many rockets have flown on the same day. powered by more than 2700

ournalists and analysts. francine: thank you so much. markets down across the globe. the index entered a bear market. president trump slammed the fed. for even considering another rate increase. may have an ally in llionaire investor druckenmiller. we talked with him about the fed. >> if you wanted to create a deflationary bust i would do exactly what the fed is doing. since 2010, corporate nonfinancial debt has grown from $6 trillion to $9.6 trillion.

where i'm from, that is about a 60% increase. during that time corporate earnings increased 27%. o how in the world did the s&p earnings increase 60%? because all of that borrowed money went to finance buybacks and m.m.a. this entire trillions and trillions of dollars that to my of were pushed were investors being pushed by the fed to go out out on a risk curve, take more risks, resulted in a big debt built up, resulted in donald trump feeling comfortable doing more fiscal spending, resulted in barack obama saying he did not want to balance the budget on the backs of old people, so there were no entitlement cuts so essentially the bond market, which would

traditionally have been a vigilante from all of this behavior, market signals were canceled, we developed yet another bubble and we're now sort of in the position potentially and i want to say potentially where we were in early 2007 but i'm not calling for a cut. that's why i say potentially. if you look at the economic indicators, which i wish the fed -- they actually look at lagging indicators. but if you look at the -- ones they look quite good. if you look at the indicators i have historically used in my business, they are not quite red yet but they are definitely amber and they are setting off warning signs. >> what do you see? >> ok. so the best economist i know is

the inside of the stock market. nd i'm sure you have heard the joke, in my economics 1 question, the stock market has of the last sessions. the best economist i know out there is the inside of the stock arket. so the fed, when they look at the stock market and financial indicators, probably it is just looking at the s&p, but the declining in the s&p which is funny when i was preparing for this interview, it was 10. it is now 13, is a mirage. if you look inside the stock market, this cyclical elements of the economy, particularly the front end cyclicals have shown a

completely different picture than the defensive parts. more sensitive to the economy. auto stocks are down 30%. they are not down 10% or 11%. they are down 30%. building stocks are down 35%. banks, which would think might be a symbol of credit. are down 25%. the russell 2000 is down over 30%. retail equities are down over 20%. o how in the world could the s&p only be down 10% or 11% when i was looking at these numbers. it is because staples and pharmaceuticals are actually up. this is the same situation i use cycle after cycle. that is one thing. the inside of the stock market, which is the best economist i know and which i have used every cycle that i have invested is

saying there is something not right here. rancine: that was stan druckenmiller speaking exclusively to bloomberg. the concern first of all, good morning. thanks for coming on. the concern is stan doesn't know what the market is going to do next. do you? >> no one knows what the market wel do for sure, but i think have a few hints. firstly, the equity markets have sold off quite hard. if we look even to the u.s., which was the best performing stock market. what stan says is right. if you look at the s&p 500, 50% of the stocks are down more than 20% year to date. right? they are in a bear market. how can that be healthy? i think he is absolutely right. i look at construction.

construction is very weak. house builders have been destroyed. housing stocks have actually been on the weak side. to me that is a sign of weakness to come in the economy. that is a very big economy. a very big employer. when you don't get housing starts you're not getting that big push in economic activity. francine: this is six months down the road that it becomes, it was interesting hearing him explain the signs that he sees. they are amber. as soon as they are red it means there is a warning side. how fast can they be red? six months? does it take until the end of the year? >> i think it takes most of next year but the problem is the time for the fed to act is definitely within the next six months. they don't have long. they really don't have long. they are a trying to shrink their balance sheet by selling

bonds. the problem is the effect of those two things combined plus a strong dollar and widening credit spreads. francine: are there any other signs? stan was very clear in saying some of the signs he is looking at is for example the decline of more than 20% in economically sensitive stocks. he also talks about the short end of the u.s. government yield curve. >> the yield curve i'm less worried about. people are again, they tend to predict recession from yield curves to quickly. the historic evidence is anywhere between six to 24 months ahead. even when it is inverted. we're not quite there yet. we're not far away. the fed should be taking account of where the yield curve is. december is a short thing. the real question is at what

point do they pause their program? even if they carry on with another rate hike. francine: ed, thanks so much. ed stays with us. still to come, don't miss bloomberg's special coverage of the meeting and jay powell's remarks. more on this next. this is bloomberg. ♪

francine: economics, finance, politics. this is bloomberg "surveillance." theresa may has given herself another four weeks to save her brexit deal. after delaying her vote in the

u.k. parliament following overwhelming opposition will announce the deal will be put to a vote afternoon is 14. as the date is pushed back further how can investors play the political uncertainty? erik asked stan truckenmiller at he thinks the ddruckenmiller what he thinks the brexit trade is. >> there is one. i don't know what it is. i could see the pound going to 135 if the markets are convinced there is no hard brexit and we're going to muddle through here, particularly if the fed starts easing. that would be obviously much down the road if that were to happen but if the politics, back to your rler question plays out the wrong way and jerry corbyn gets in the mix, you know, then

you could see a big downside. it could go either way. it is not so binary. it is not something i want to play. the beauty of the pound trade was a one-way bet. it was either going to be flat or we were going to make 15% or 20%. this is not so appealing. you can either make 10% or lose 10%. i cannot figure out which way it is. >> if in fact it goes the wrong way and there is a hard brexit and jeremy corbyn succeeds theresa may as prime minister, do you think we see the pound dropping to that post brexit low of 118? >> possible. i don't know but it is possible. francine: to talk more about the brexit is ed from b.n.p. paribas. he is still with us.

it doesn't feel very binary. it was interesting to hear stan saying actually they couldn't really lose money back then. what is your positioning on u.k. assets now? >> it is definitely tricky in the short term. what i would say is a lot of people haven the position of u.k. asset exposure. you can't figure out whether it is going to be a good thing or a bad thing. certainly there is the hard brexit and the no deal hard brexit. april 1 could be really quite a shock and the other option is that we figure out something in between now and the end of january. we really don't have very long. francine: why the end of january? because then you don't have any renegotiating options. >> correct. time is up. time is actually up at the end of january. francine: we often talk about this but it is difficult to me what the markets are pricing in.

this is the betting odds. if the market is priced for a second referendum, will they be disappointed? >> no, i think the odds of the second referendum have risen sharply in the last few days. the fact that parliament has the inal say on what government should do next is very important. there are a lot of conservatives calling for that already. francine: thank you so much. up next we'll break down the latest data on the german economy. this is bloomberg. ♪ this is bloomberg. ♪

francine: this is bloomberg "surveillance." i'm francine lacqua from london. german business sentiment has deteriorated to its lowest flel more than two years. corporate confidence fell from 102 last month to 101 for december. trade tensions and a risk of a brexit deal could hamper an economic rebound. thank you for giving us a little bit of your team. how woished are you that -- worried are you that trade concerns escalating? >> there are signs of a certain detans that the u.s. government

may come to a misunderstanding. there is this background risk and it is not only the risk there is. the situation of italy. the situation about brexit. so a number of difficulties weighing on the economy here. francine: what signals are businesses sending about the possibility of a rebound from -- are they confident about the future? what are they tell you? >> in fact, the car industry is having difficulties due to the emissions tests. the car industry is sending more positive signals. there may be a certain rebound in the next year. other industries are sending bad signals. if we look at the readings from investment good from the chemical industry. we have a less optimistic scenario here. we're not seeing really a downturn here but cooling of the economy and across the board it is not just the car industry. francine: apart from the emissions testing standards,

which is hurting the ability to ramp up production, is there anything else holding back the car industry or are you seeing signs that things are slowly getting better? >> there is the issue to have future to have diesel. many consumers who think about buying new cars wait now. they don't know should it be a diesel? should we wait for more electric cars for a better infrastructure? so consumption is going down here and it is very clear that the car industry has more german al problem the industry is focused on the combuston engine. it is a problem that won't go away easily. francine: when you look at the current slowdown in germany, houng do you expect it to continue? >> we think this is a permanent slowdown. it is not a downturn as i said. we expect positive growth next year. we have to see if we think about

potential growth. the normal long-term growth. this is about 1% given the demographics and everything. maybe this is just a return to normal. francine: thank you so much for joining us. ifo esident of the institute. turning point in this china's history. we'll be live from beijing next. european markets down. if you look at german business confidence, it is worsening. we just heard from the ifo president. ♪

francine: economics, finance and politics. this is bloomberg "surveillance." i'm francine lacqua in london. let's get straight to the bloomberg first word. hi. >> the federal reserve opening

its final meeting of the year later today with the white house turning up the heat on the wisely anticipated rate rise. president trump tweeting his pposition to the hike. a bloomberg survie suggesting the fed will slow the pace of hikes next year as threats to the economy mount. anley druckenmiller warned investors should expect returns on stocks for years to come. banks would drop stimulus from a global economy that is slowing. >> if you look at the economics indicators, which i wish the fed did. they actually look at lagging indicators. if you look at the -- ones they look quite good. g.d.p. has a -- so forth and so on. if you look at the indicators i have historically used in my

business, they are not quite red yet but they are -- i'm sorry. >> no, continue. they are not red yet but what? >> they are definitely amber and they are setting off warning signs. >> the board of cbs's has denied $120 million severance pay to less moonves. he was fell bid accusations of sexual harm. the company states he was responsible for willful and material malfeasance. moonves stepped down in september. global news 24 hours a day on air and on tick tock and twitter. this is bloomberg. francine? francine: today marks the 40th anniversary of china launching

its reform and transforming the country into a great modern socialist power. a number of obstacles line the way. embraced e leader reform. wered trade -- and greater xchange rates. an aging population. huge inequality and the risk of a middle income trap when progress as measured by per capita income staaled. after that, the fight for influence.

while a strategy of hide your strength, bide your time, xi wants china to be a global super power and that led to tension with the u.s. and others wary of on trade, licies technology and market access. e question is whether xi is increasingly state centric bolsters china's position or fatally undermines its potential. francine: earlier this morning, chinese president exin ping said -- jinping said any part of reform would only be coming from in the country. >> no one is in the position to dictate to the chinese people what should or should not be done. francine: president xi didn't

mention the reform initiative which helped push equities lower. tom, first of all, great job with that nice explainer. we heard -- did president xi break any ground? >> well, there is a sense of irony i think that president xi took to the stage during the anniversary, without announcing any new reforms or measures to open up the markets here. business and investors will be disappointed there were not additional measures to address the economic pressures here that are building domesticically whether that is consumer sentment, business sentiment, slower auto sales or the trade war. there were no measures from president xi. this is a backward looking speech looking at the

achievements over the last four decades. it was a lot of focus if you want to get a sense of president xi's priorities on the communist party, the role of marxism and the state in shaping and forging china's last four decades of economic progress. he said reforms would continue and remain challenging. china and president xi said they will not buckle to pressure from outside forces when it comes to their reform agenda. not much for investors to cheer. now the focus is on this annual economic meeting that is going to start tomorrow and wrap up on december 21. there is expectation that you're going to get additional stimulus measures to support the economy and push back against some of the pressures building from the trade war. that is now where the focus is. francine: thank you so much.

they didn't get what they were expected. can they get it at a later date? >> absolutely. i think markets tried to anticipate too much. let's not forget the u.s. and china is in the middle of intense trade talks. expect measures to be announced now is way too early in my view. it is going to take some time. some of what the americans would like is probably really what the chinese need to do anyway. reinforcing property. opening up their markets. it is actually continuing the reforms and to do it their way. i think there is more negotiations that need to happen before they can make an announcement. francine: does reform and stimulus go hand in hand? >> i think they will need to stabilize the economy. clearly we are seeing a

slowdown. not on the continued monetary stimulus in terms of injecting liquidity in the economy and easing credit, we expect some fiscal stimulus. retail sales have slowed down significantly. they are going to get the domestic stimulus and growth going again. francine: our markets -- what asset also move the most on chinese reforms? ed? >> we love local shares in china. as well as the reforms, these will be included in the msci and the ftsey. -- ftse. francine: let me bring you over to my chart. christmas moves early.

is this a china story? >> i think as well the view and to the u.s. economy and to what the fed may do is very important as well. what i would say is december is not done yet. there is still time. francine: where is the santa claus rally? anything you would be positioning yourself for that santa claus rally? >> i like small caps. the santa claus rally is in small caps. francine: thanks for coming on. stay with "surveillance." plenty coming up. including closing the gender gap. women are on track to earn the same as men but in around 200 years. we'll talk a little bit about that and then a little bit later as accusations of sanction yahweh.ns hit

huawei. ♪

>> i think the air can be let out of this balloon without causing another financial crisis. i think it is possible. -- i is hard to believe don't think it is clear cut to me. a lot of people say this is a collection in a -- market. the highest probability is we

struggle going forward. i'm long treasuries. i'm long two years and i'm long five years and i'm long 10 years and i have been for a bit. we have been short all the financials because to me it was very simple. why in the world would you buy a group that needs rates to go up to own it? because the last time i checked, banks are equities and equities don't do well with rates going up. >> are you still short financials? >> i am. i've been short credit for a while but easy to be short treasuries. if rates are going up, i don't want to be short credit. if i make money in treasuries, because the economy fell apart and there will be a 5% to 6% nominal yields for

stuff that would be 8% or 9% an environment like this, the risk-rewards is terrible in credit. those were the calls on the markets. let's look ahead to the markets ahead of the fed. this is what we are doing overall. european stoxx 600 down. getting the markets some evidence. the wrong impetus is that we do not have the reforms we were expecting from china after the speech from president xi. also the tenure yield -- the vendor cap -- the gender gap has a long way to go. it will take 108 years for there to be gender parity across politics. paid between men and women are

vast, and it will take 200 years to bridge them. withender equality economy 140 countries, the u.k. was 15th, and the united states came in at number 51. to help us break down this report, the head of social and economic agendas at the economic foreman. we are joined. thank you for joining us. what is the -- what surprises you the most when you put this together? which ones should be doing better? saadia: we have been doing this report for over a decade. we started to see worrying signs in the last couple of years that the pace and march to gender equality was starting to taper out. this year it is clear that progress is stalling. atted states is at 51, china

103. that is what is setting the pace for everyone else. one of the most populous countries, india is in the bottom tier of the rankings. that is what is changing the situation for global numbers. at the same time there are bright spots, countries like france that have jumped up. france is the highest ranking country. the nordic economies are doing well, they are made -- they are maintaining position and accelerating their progress. francine: wise progress stalling? is it economic uncertainties? we worried about a slowdown in the economy so the gender gap gets bigger? saadia: it is more fundamental and long-term, and how .echnological change on one hand automation has

started to impact a lot of those professions that have given women good middle-class customerds in the past service roles are the type several's that are starting to get automated away. the high wage, high in demand roles of the future that fall in the bucket of i.t. roles across multiple sectors, ai specialists and machine learning specialists, those roles employ fewer women and have a smaller pipeline going into them. there are worrying signs for the future when it is not just the pace of gender equality that starts to slow down, but we might see widening gaps. do governments care? saadia: this is falling at a time when we have not found a solution for one of the most

fundamental issues, which is the extra burden of care related work that already falls on the shoulders of women in most economies with a few exceptions in parts of europe. in most economies there is not a good system in place to provide support for child care, elder care, women do the majority. even in the nordic economies where there is some care if a structure, it is not at equality. until we resolve that issue and ensure there are more women going into the pipeline of talent that will be needed in the future, we will continue to see these issues. i do not think this is all negative. we can think of this as a moment of transformation where we have a unique opportunity with all , we canopportunities

hardwire gender equality into the future of work. is there much interest in expanding diversity beyond the gender? increasingly, there is a question whether it is too narrow of a focus? not narrow, women make up half of the worlds population. this is beyond diversity, and ensuring half of the population has the ability to integrate their talent. it goes beyond fairness. it looks at the economic case. we need to look at all forms of diversity, whether religion, where you come from, your sexual orientation, all of that has to be looked at because there is one that means we are integrating all the talent we have available. and it is the fair and equal thing to do. all those areas need to be

looked at. there is segmented data and the segmented approach around each issue because it becomes diversity. francine: thank you so much. , head of social and economic agendas. wide-ranging interviews, and the decision from the fed. following. in europe this is bloomberg. ♪

francine: huge news if you are a football fan. i was a marino has left manchester united. o has leftrin manchester united. it was a difficult season. liverpool at the top of the premier league, they did not do great, so the result at the back of that we are

wondering if it could be the beginning of the end for the era.mourinho he has left the club. we have a lot of football fans watching today. to who willdeeper replace him, and break that to you. has defended way their security and stepped-up engagement with world $2 million to invest in cybersecurity. to talk about the concerns regarding chinese investments, let's get to frederic court, managing partner/founder, felix capital. thank you for coming so close to christmas. does it have an impact on investments, do you look at christmas to invest in the right companies? frederic: we do look at retail, it is an important quarter. q4 with spectacular

amazing growth, travel digit growth year on year. in the u.s. from black friday, that is a big moment. it has been good. francine: i like hosting you hear because we catch up regularly which gives me an overview of what you are thinking. last time we spoke about brexit. today i want to talk about china and the trade war. if you have three things that concern you, what are they? frederic: we are focused on talent. one thing we talked about last time access to talent, especially in london. that is a key question going forward. we are focused on what will happen with brexit, not for the short-term or the medium term. we are interested in the transformation of retail and

consumer in general driven by china. our emerging which are creative, different from the model in the west. francine: is it pop-up stores? frederic: what china has done is go mobile first. if you look at facebook and messenger, they very much follow the innovative blending of services around the mobile app. that is interesting, so we spent time looking at this to get might ben what things in europe and the u.s.. francine: if you look at china and think it could happen here, you get in the early stage investing in these companies? frederic: it is difficult to invest in china. we might do that over time. we are currently looking at investing in the west, targeting the chinese consumer.

targeting the chinese luxury customer. --o looking at the growing increasingly real income, and specific services that are different from the services targeting western people. francine: thank you so much, you may have to come back. maybe before christmas. frederic court, managing partner/founder, felix capital. "bloomberg surveillance" continues in the next hour. we will bring you our exclusive interviews. this is bloomberg. ♪

tom

francine: the s&p 500 is headed for one of the worstfrancine: numbers on record. piles on themp pressure. may sets aed theresa january deadline for the vote on her deal. good morning. this is "bloomberg surveillance ." i am francine lacqua in london. tom keene is in new york. we need to talk brexit. urinho. to talk jose mo this is a big deal for our football watchers. am, i guess it is a no-confidence vote. i saw the game the other day, and i have to be honest, i am a know nothing on this, and i am not surprised he is shown the

door. francine: i know about him, one of the biggest personalities. on josehave a lot more mourinho. we will talk more on markets. let's get to the bloomberg first word news in new york city. president xi jinping insists no one can dictate reforms to beijing. he insists china will stick to its policies despite pressure from the u.s. and others to allow more eight competition in its economy. present she spoke on the anniversary of reforms that unleashed the economic boom. the european union will not make it easy for the u.k. to leave. if there is no agreement, bloomberg has learned the eu

will do many deals with the u.k. to ease the chaos of a no deal brexit. there would be a bear of -- a bare minimum of custom, finance, and aviation. a new survey shows american retail investors agree with president trump that the federal reserve should stop raising interest rates. the poll was conducted by wells fargo. not supportw do rates. billionaire investor stanley jock and miller is not a fan of the communication coming from the fed. druckenmiller speaking to us. >> i grew up in a world with the said did not spoonfeed you. we seem to do fine without spoon feeding. >> next move in a high-profile

case involving sexual harassment is up to les moonves. cbs has denied $120 million payout to its former ceo. moonves flouted company policy an failed to comply with internal investigation. his lawyer called the conclusions without merit. that could set the stage for a lawsuit. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. tom: after that market yesterday, let's check equities, bonds, currencies, commodities. what a day yesterday. we will have a chart on that. futures rebound, so what? big move there, euro stronger dollar weakness. under $50 peroil barrel. maybe it should be 25, 26.

the dow closed well below the s&p 500. three-year bond with a vengeance came in seven basis points yesterday. yen would be gasping. francine: this is what i am looking at. it is a similar board. some risk off sentiment. i am looking at yen and gold. yen is advancing. if you look at the disappointment that many of facing,rs are the world's second-biggest economy in the keynote speech. grim, and a doubt a little better. line, werket below the are below a correction on the dow. at bear market is down

22,000. that frames where we are in this set. francine: this is my chart. , that isreat bar chart my christmas present to you. this is what i am looking at, the percentage of s&p 500 the 200 day moving average. it puts the s&p -- do you like it? tom: i like it very much. maybe in yesterday, the slowness of december is when smart people write an essay. this is what we heard from the former fed governor writing with stanley druckenmiller. here he is on chairman powell. air can be let

out of this balloon without causing another financial crisis, i think it is possible. believe atard to least markets will not have struggling returns the next three to five years. >> possible, but how difficult? >> very difficult which is why i do not like the insurance policy of qe3 to get escape velocity in the first place. difficult, and with poor returns. how poor? s&p returning the between zero and 5% annually the next five years. strengths of my investment returns over time was

being open-minded. i am throwing out answers to something as my wife and others would tell you, you believe something on monday and two weeks later he changes his mind. >> are we in a bear market now? >> of course we are. we have been in a global bear market for a year now. for those who say there is no correlation between the economy and stock market, i will point out that the dax and the china january, and in don't know if anyone has seen their economic data lately, but i am not talking about insider stock markets. i do not think it is clear-cut that this is a correction in a secular market. money for have free eight years or nine years, we have debt built up, we have investment, this could take

three years to five years sideways, or a big down with something else. but i think the highest probability is we struggle going forward. >> and the bottom may be a ways away? >> maybe, or it could be right here and we talk about sideways for quite a while. i will say this in terms of the current market, we have done a lot of the risking. -- de-risking. i saw qt coming and i lost my in july and august because i was three months early. you cannot think ahead in this market. erm: stanley druckenmill talking about investment application of that policy. what we want to do is drive forward the conversation, and we can do that with somebody

holistic, legendary. atchim fels holds court timko. we will look at their 2019 view in a minute. good morning. francine and i say good morning. you have always had phrases that matter, what is your phrase for the powell said? joachim: i think the phrase for theyowell fed is that are getting closer to a pause. that isn environment rookie season, ben bernanke wrote about his rookie season in 2006 when he had become chairman. when he first uttered the phrase pause, markets rallied. the next move would be down. this is what jay powell may now be facing, if the fed starts

to talk about the pause, markets will assume we are done with rate hikes, and the next move could be down which could leave -- lead to volatility. was ahat permeated it global outlook, a central bank to the world. you had chairman bernanke at your annual meeting and other advisors. is this a central bank that is the world's central bank? joachim: yes, clearly the fed is central bank. there is dollar liquidity in the world. the fed is driving the cycle, and we saw this year when they started to run down the balance sheet, cap hiking interest rates, and the reaction is that foreign stocks went down and emerging markets got more volatile. centralis the world's bank and its mandate is a national one, so it is reluctant to accept that role. francine: we were interviewing

stan druckenmiller, and he explained about indicators that in the past looking at an imminent recession. what indicators do you look at four and imminent recession? joachim: we are trying to look at everything. we are looking at big data, a wide range of economic indicators. we put them in quantitative models and what the models spit out is an average recession probability over the next year like 30%. francine: is that quite high? joachim: it is quite high, the highest in this expansion, but not before the recession, so this is why we say the lights are flashing orange rather than read. -- rather than red. what is more important for markets is how will that , and ion probability

think that could be the case in the course of next year. we think we are in a difficult environment for investors. francine: what you make about the inverted yield curve? joachim: you look back in the past, it is not come from inversion in the short end, the three-month rate and 10 year yields invert, we are quite some time away from that. which is why we will say the lights are flashing orange but not red. tom: joachim fels, we will come back and look at the 2019 view. tomorrow, our fed special will be more interesting than the last one, a presumed increase but much more. we will be at the press conference. special guests are scheduled, chairman alan greenspan. this is bloomberg. ♪

>> boeing will not stop showering cash on investors anytime soon. the $20 billion share buyback program. the stock has tripled. will buy endeavor for $8 billion, half of what it expected when it put itself up for sale. they want tod retain a large quantity of its

mineral rights. in germany, angela merkel's government, to accommodate refinancing of the bad bank funds set up during the financial crisis. the money will help bankroll germany's biggest budget on record. it is focused on digital infrastructure, families, and defense. francine: thank you so much. pimco is out with its global forecast, and global growth is sinking lower as the end of the u.s. economic moves. here to take us through, one of the authors of the report, joachim fels, pimco. fourndicators you look at an economic slowdown, what is your best call for 2019? joachim: i think the global economy will grow more slowly. i think the key is that we will

.ee a resynchronization this was the year of divergence. we had a fiscal boost playing out in the u.s. but growth has peaked in the second quarter. financial conditions have tightened, and the fiscal boost will be fading. the u.s. is sinking lower toward the rest of the world. francine: why are you cautious on generic corporate credit? joachim: we think we are in the late stage of the business cycle , not at the end of this expansion, but in the later stages. credit begins to underperform at that stage. the corporate sector is leveraged. interest rates have been rising. we are underweight, cautious on corporate credit. that does not mean we are bearish. we get our exposure, our yield somewhere else. for example u.s. mortgages,

because the u.s. housing market looks solid. tom: you were brilliant on the phrase the rude awakenings. awakeningsse rude are upon us right now. leveraged loans are front and conter, this is a pim wheelhouse. gauge the scope and scale of leveraged loans. there are some pockets of concern in that area, quite obviously, and this is another reason we are cautious on this sector. i do not think we are at this stage close to where we were before the last crisis. pockets of concern. this is a reason to be cautious. i do not think we are sitting on a huge problem that could end the economic expansion. there are other rude awakenings that we worry more about, and one of them is that as central

banks globally are withdrawing support, you will see a slowdown in the economy and volatility in markets rising. tom: what do we do with equities? you are a full-time economist. can i be in the stock market? stocks inou can be in multi-asset portfolios. we are neutral equities, so what happens in the later stage of the business cycle is that equities do relatively well. volatility is picking up clearly, and that is what we are seeing. within equities it makes sense to be in the defensive sector, large-cap stocks rather than small-cap stocks. technology will do relatively well. the u.s. stock market relative to other foreign stock markets will do well because the u.s. is

a less cyclical market and a more profitable market. investors have to get more cautious. it is too early to get out of the stock market. francine: thank you so much joachim fels, managing director / global economic advisor, pacific investment management stays with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

to announce his 2019 budget, and will opt for stimulus and nonoil growth above 2%. joining us now, yousef gamal el-din. we expect the deficit to come in . how much of a focus will be on the price of oil and the political turmoil in the kingdom? yousef: i cannot underscore enough how big an event this is. it is one of the most important events in the year. it does not impact just saudi andia but markets investments far beyond saudi borders. the budget this time around is going to focus on what can be generated in terms of growth. initial indicators suggest they will continue to depend on stimulus in one form or another. they have extended allowances to employees of the government, and government is the

not willing to take any risk in light of what is happening domestically. and there is a lot at stake in the form -- and the theticipation goals -- diversification goals. are they going to look at slashing subsidies and extend coverage? plenty unanswered. i was wondering what this means. extending the monthly living allowance for one year, is this for employees? is it for students? is it a way to placate any uprising in the country? yousef: that is exactly it. ,hey initially put in reforms and that was a drag on growth. consumers got beaten up quite a bit. this is a buffer to offset the impact on the average saudi citizen.

whether that will be enough to make a difference remains to be seen. the expectation is the budget deficit will come in less than the oil on the back of prices which were higher than anticipated. francine: thank you so much. yousef gamal el-din joining us from riyadh. will stayls of pimco with us. we are looking at a little bit of pressure, there is risk off. of is moving on the back disappointment from china on reforms. this is bloomberg. ♪

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right now, your first word news. michael flynn's lawyers wrote a sentencing memo in which they were critical of fbi procedures. federal reserve policymakers begin a two-day meeting today, expected to begin with another interest rate increase. president trump has been blasting the fed for even thinking about a rate hike. bloombergtv discussing that with billionaire investor stanley druckenmiller. >> it would be horrific if the fed were to pause because they were bullied by donald trump. i also want to say that it be horrific if the fed didn't pause because they were afraid people would think they were being bullied by donald trump. that would be just as political as the first outcome. reporter: and russia, the

kremlin as rejecting reports it was behind a political disinformation campaign on american social media. reports from the u.s. senate intelligence committee suggesting moscow's effort to help donald trump in 2016 were more wide reaching than originally thought. a kremlin spokesperson zhang reports try to blame russia for social tension in the u.s. if it all goes right, four companies will launch rockets today, a first for commercial space and declaration desk for spac -- for commercial space exploration. it all begins a little after not a clock a.m. new york time, when a.m. new -- after 9:00 york time, when spacex is expected to launch a falcon nine rocket. --global newsons

24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. tyl -- i'm viviana totter francine briefing me all of this english football news. what you think of manchester united? francine: i thought they were going to call to offer you the manager job. what a surprise that would be. i think a lot of people were expecting this. i think a lot of people thought this would come at a later stage. u was blown away by liverpool. i watched part of it. that left the team cut adrift and the premier league

because of a number of personality clashes. manuis interesting is that is lifted. tom: we will bring up the chart right now. up it goes. everything is great. and down we go, crushed by manchester united's abject failure. what do you have before we go to our football expert? francine: jeffrey published a today recommending people buy shares in manu. they basically said because of the increased value of viewing rights, as well as increased interest in television advertising as we are seeing more streaming services like

netflix, it can be one of the companies that would benefit the most. tom: let's go to our football expert on the west coast of united states. i'm sorry, your arsenal went through this before. a reset, a restructuring. learnan manchester united from the arsenal reset of a few years ago? reporter: i think every new start brings new opportunities, so i don't know what the lesson is, but i think the lesson is try a different style. bring in more young players. that's what usually works in football. it works in arsenal. it works with other teams. i have a team back home in germany which is doing extremely well given that they are usually sixnderdog, but they won

matches in the europa league. teamwe will have full coverage of this important world news, but right now francine, you need to go to a woman who bleeds newcastle united. francine: we do. ,ust a final thought on marinho a new caretaker manager will be appointed -- will not be -- until --til deat earlier this morning, chinese president xi jinping said he is willing to push ahead with china's reform and opening up economic strategy, warning that any reform will be coming from within the country. pres. xi: any change

will come from the chinese people. joachim fels from pimco is still with us. were markets expecting too much? >> i think by this stage, there is a pretty high bar, especially given the state of play in u.s. markets today before. we can't really expect too much to come out of these early talks at the beginning before we've conference inork the policy meetings that come out over the course of this week. even having the headlines which are all caps under wraps until next year. looking forle were too much of a turnaround. it is possible people had hoped for a more conciliatory tone in terms of u.s. relations, but

neither side at this stage has any incentive to escalate matters further from what so far have been trade skirmishes that but --en painful come have been painful, but from here would be a trade war. tom: if we just take -- francine: if we take a step chinese economy stimulate economic demand? >> i don't think it is going to work so easily. what we are seeing at the moment is they really have policy on the loosest setting they can without actually cutting rates. the interbank rate is at the bottom of the pboc's rate

corridor. , so started injecting again that tells us they are comfortable with rates at the bottom of the corridor. i think as soon as we get any kind of alleviation of the trade tensions and perhaps a little bit of depreciation pressure is removed, we might see them go as far as cutting rates. isreason for saying that that they've been trying the marginal approach since q2 of this year, and so far they have very little to show for it. , marketarly in q4 conditions have started tightening again. that tells us economic growth isn't going to be picking up until the latter part of next year. that is a long time to wait. tom: freya, what is the state of the domestic chinese economy? the people in the major cities we know, and of course across the nation? what is the state of the actual economy? >> what we've seen in the

monetary data, which is the best leading indicator for china, which is a very banking centric economy, if people are moving their holdings of the curve. that tells us they are not -- holdings up the curve. that tells us they are not willing to spend. investment has been the one bright spot in the economy, but it looks like some of the debt stimulus on the local government front has been removed over the course of q4. going into the first half of next year, we're looking at households and firms that are really thinking of increasing a savings rate, and a deteriorating labor market as well. that really points to growth deteriorating into the second half of next year. tom: thank you so much, freya pantheon's chief

macroeconomics asia economist. stay with us worldwide. this is bloomberg.

♪ francine: this is "bloomberg surveillance." tom and francine from london and new york. u.k. prime minister theresa may has given herself another four weeks to save her brexit deal. she says it is still the only way to avoid a chaotic split from the european union, and she rejects a second referendum. london us is bloomberg's

politics reporter. is theresa now weaker than she was three days ago? she had a conference vote that she won, not great, from the conservative party. what are the other parties now doing? reporter: yesterday jeremy corbyn, the leader of the labour party, was a bit back and forth. a said he was going to put up motion of no-confidence. one moment it was on, one moment it was off. try it and see if you win because the hardline brexiteers, the er g group, said they would support the prime minister, so it looks like we are back in deadlock again. tom: what are we doing here? we are getting to a january vote. what are we going to do at the end of december? the u.s. is going to have a government shutdown maybe. what is the calendar through the end of the year?

[no audio] francine: all right, we will have plenty more on brexit throughout the day. to continue discussing the joachimarket story, fels of pimco is here. we had a bit of a connection problem with our correspondent there. the result is on this binary. you either have a deal or you don't. guest: right. we still think the probability of a no deal chaotic brexit is relatively low. nobody wants it. how we get to that soft brexit is a little unclear. it may take two votes in parliament. it may take an extension of article 50. but ultimately, we would get to some sort of deal with a soft transition period. it is more likely than not that deal yields which have fallen

very low will rise again. there's also a chance that sterling recovers on the back of this. but again, there's a lot of uncertainty over the near-term. francine: do you need to attach probabilities now to a no deal brexit? guest: i guess everybody tries that. the only thing i'd say is we think that probability is very low. 5%, maybely attach 10% probability to a chaotic no deal brexit. tom: i guess it speaks to the populism. we are going to talk to you about europe may be at another time. speaking to the populism of europe like brexit, is it permanently entrenched, this democracy upset we see? guest: i think it is. maybe not permanently entrenched, but entrenched for quite a long time because we've gone through a crisis in europe not too long ago. europe has only been recovering recently. inequality in many countries has increased.

some countries, particularly peripheral countries, have lagged behind in economic the relevant. so it is not only about brexit. you will see the yellow jackets in france, protests in other countries. you see support for extreme parties on both sides of the political spectrum virtually everywhere. the rudehis is one of awakening realities that is likely to stay with us over the next few years. francine: i want to get your thoughts on china. are the markets right to be so concerned about the fact we didn't hear reforms from president xi? he was to be seen as a reform man, so maybe it will be heard at a later stage. guest: i think he wants to do the reforms, but at the moment they are struggling with competing and conflicting objectives. they need the reforms to get to that next stage of development, more consumer led growth, growth

led by the service sector, higher value-added production. but at the same time, they need to stop the downdraft in the economic data and do something about the downdraft in their stock market. that calls for more near-term stimulus. but again, it is conflicting objectives because the stimulus would mean even more debt. this is how they responded in the past. i think they will try to muddle through. i think it will be a bumpy transition. you will get some more easing, but i think it will be in the form of giving some money to the people in the form of tax cuts and hoping they spend it rather than ramp-up public spending massively as they did in previous downturns. francine: when you say bumpy transition, what is the biggest policy mistake china could do right now? guest: the biggest near-term policy mistake is that they actually don't ease enough, that they worry too much about continued deleveraging or the debt buildup, and that we see a much sharper downturn.

that could then lead to more outflows and induce them to let the currency go and to have a very sharp depreciation of the exchange rate. i think that would then create a problem for the global economy because china would then be exporting deflation. francine: thank you so much, joachim fels of pimco. we will have more from our exclusive interview with stan druckenmiller. this is bloomberg.

♪ francine: this is "bloomberg surveillance." tom and francine from london and new york. a big change at one of the best known teams in any sport. manchester united says general ninho is out. easton -- now is joe

marino --nager is a orinho is out. joining us now is joe easton, and joachim fels is still with us. liverpool are fighting for the league title. awayleaves them 11 points from the champions league place, which is important on the financial side. it is important to be part of the champions league. francine: i had a beautiful note that i looked at today by jeffrey saying manu is still a great buy because of netflix wanting to buy content. they make -- does it make a difference? reporter: the jeffrey's note was really interesting because it said live tv advertising is becoming more valuable because

netflix are eroding the value of scripted television advertising. from earlier, the champions league is the real thing where it comes down to tv rights. tv rights values have increased so much over the last five years in the u.k. doesn't have a share of that, that's where we look at the management. tom: let's talk football. joe, we just took this from "the telegraph." it really talks to what we saw was liverpool over the weekend. they absolutely crushed manu. manchester united stands accused after the debacle of a defeat liking direction and even soul. they've been highly complacent and negligent. sounds pretty good.

sabino because he shoots from far out. liverpoolrived at since mourinho took over at united. reporter: you mentioned a lot of players from liverpool that were really unknown before clark came ourinho had jose m several that haven't fit in. if anything they've been alienated from the team. it would have been important if he proved they could fit in, but he has available to do that. tom: one final question. is german football better than premier league? guest: it is not better, but it

is more interesting, i think. there's less money involved, so you don't get these big differences between the top clubs and the rest. tom: interesting. , thank you for your football superiority. we can't get this from the other people at pimco. joe easton, thank you so much. particularly looking at that investment security, just as good as a bond, manu equity shares. francine: do you know who's joining us on manu shortly? jim o'neill is going to be on the line. tom: we will do that tomorrow.

♪ tom: this morning is the most ugly december.

higher highs and lower lows. chairman powell put in place as soon as tomorrow? chairman xi says it no one will dictate to the chinese people. it is a new era with chinese characteristics. and you're a mean one, mr. trump. his team wouldn't touch him with a 39 and a half foot pole. good morning, everyone. this is "bloomberg surveillance ." live from our headquarters in new york, i'm tom keene. in london, francine lacqua. we are struggling to be half as smart as jon ferro, aren't we? francine: we are scrambling, but i think we are doing an ok job. it is theook at manu, most valuable support team in the world. tom: we will look at that in a minute. right now, bubbles over to the

side of my head. we will get to that. it is london bubbly bubbles. right now in new york city, our first word news. reporter: china's president xi jinping has said no one can dictate reforms to beijing. xi insists china will stick to its policy agenda despite pressure from the u.s. and others to allow more competition in its economy, speaking at the start of 40 euros forms -- forty-year reforms. willberg learning the eu leave out doing any deals to ease the chaos of a no deal brexit. a new survey showing the majority of american retail investors agree with president trump.

they say the federal reserve should stop raising interest rates. the poll was conducted by wells fargo. 61% of those surveyed don't support further rate hikes. fed policymakers are likely to boost rates at their two-day meeting today. meanwhile, billionaire investor stanley druckenmiller is not a fan of all the communication coming from the fed these days, speaking exclusively to bloombergtv. >> i grew up in a world when the fed didn't spoonfeed you everyday. you would just come in and it turns out they raised rates or they are tweaking the repo rate. we would seem to do fine without the spoon feeding. reporter: the next move in a high-profile case involving case againstment les moonves. a severance pay out to its former ceo, saying he flouted company policy and failed to comply with an internal investigation.

that could set the stage for a lawsuit. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. let's get to the data right now. what a day yesterday. here's the score. one.pool three, man u a lot of noise. oil, oil, oil. that is quite a move in west texas intermediate. there's the dow. it is sort of on support and through support. let's try the lines. you can do it after a brokerage -- after a beverage of your choice. yen showing some risk. francine: i'm looking at the risk off feel. i'm also showed my data, which is why i'm looking at gold, yen,

dollar-yen. you can see european stocks down one quarter of 1%. chart.manchester united there's the trend base. like most sports teams, you kind of own it because you like the team. here we go with the immediate gain, a huge revenue stream coming in. thanks to joe easton for joining us in the last hour. down we go with the troubles of this storied franchise. right now, let us move on to the markets. with got some good guests at the top of this hour. first, we need to hear from one stanley druckenmiller on the fed. >> i do want to address trump because i know there's a narrative out there that the fed will lose credibility if they cave-in to trump. look, i could not agree more that it would be horrific if the

fed were to pause because they were bullied by donald trump. i also want to say that it would be horrific if the fed didn't pause because they were afraid people would think they were being bullied by donald trump. that would be just as political as the first outcome. that a stopped clock is right twice a day. permanently is a low interest rate guy. we know that because he is from the real estate industry. but just because donald trump thinks a dovish tilt relative to where we've been is appropriate now does not mean is it -- does not mean it is a good idea right now. you are goingason to not pause is because donald trump is bullying you, you are being just as local as if you did pause. so we need to take them out of the equation. reporter: how much board to

politics play into your investment politics in the trump era? >> a lot, and i stink at it. learned to solve economic puzzles and try to think 18 to 24 months ahead. when the president is so myopic he thinks one or two days ahead at the most, it is very hard. and obviously it doesn't take a rocket scientist. all you've got to do is watch for a couple days. it has a powerful impact on markets. economic signals and puzzle solving is something i've done for a long time and have some confidence in it. how all this politics is going to play out, i'm not so sure. i happen to think the china thing will work itself out because both sides i think desperately want a deal, both

trump and xi. but i don't have the kind of confidence in that forecast as the economics stuff i've been doing for 40 years, so it plays a big part. but a major part is quite unnerving. reporter: does it matter if the government shuts down? >> i don't think so. that is a lot of nonsense. it will reopen again. it is discouraging to see the theater. reporter: more of the same. >> more of the same is a great term for it. tom: mr. druckenmiller with our eric schatz. the fed governor really got some high marks through the beginning and middle of the financial crisis. really just a stunning rebuke of raising rates now. ,oining us are michael mckee running all of our economic coverage worldwide, and cameron crise with bloomberg macro.

it is great with the blend of you here. mike, what did happen to the monetary policy group? >> nothing really. workedr that kevin on this kind of thing. the idea that the fed is going to do something different, they can change their minds. the last time the fed raised rates and put out a dot plot was in september, so everybody's views have changed. tom: is all the stuff in the , michael the games mckee's world, is it of value? all of the probabilistic guessing we have at bloomberg,

does it avail you now? >> i think you could argue it is probably of less value than normal circumstances because there is so much duress among investors across asset classes. i think people have been any mode where they are closing risk. i think if you asked maybe 50 people if the short end of the curve is accurately price for 10t year, you might get that say yes and 40 that say probably not. but this time next year, there's not a whole lot you can do about it if you don't have the powder to deploy. what kind of indicators, away from the inverted yield curve, will you be looking at for tension in the markets coming? stan druckenmiller was talking

about some of the sensitive stocks on the s&p 500, for example. >> and they got absolutely lambasted yesterday, which is kind of telling that we've morphed into what was an exogenous shop to financial markets to more of an endogenous shop to equities. yesterday was all about just for the money. if you are an equity investor and you've had a bearish tilt, or thought that things were looking a little ropey, you would naturally plow into defensive sectors like equities and real estate. yesterday that was exactly the right call, and you got punished for it because those were the two worst-performing sectors. that is an it for nearly difficult market in which to operate. francine: where do you think the fed is looking?

how much is the fed actually looking at the markets as an indicator of what they can or can't do. >> i look at it two ways. is it having an effect on the real economy? is the decline in markets actually going to slow consumer spending because people are worried about their portfolios? we generally find that doesn't happen. it is much more tied to home price appreciation than equity appreciation. is if we see some sort of disorderly movement in the markets that signals some sort of financial systems stress, they would be concerned about that, and they saw that in 2016 when china fell significantly at the beginning of the year. reasonsne of the they held off so long in raising rates that year. we haven't seen a decline because they generally been orderly. tom: excellent.

mckee will be at the press conference. special,.ve a fed as always scarlet fu, some wonderful guests. alan greenspan to join us. p.m. that tomorrow, 2:00 worldwide. this is bloomberg.

♪ this is: -- reporter: "bloomberg surveillance." bowling doesn't intend to quit showering caps on investors anytime soon. -- boeing doesn't intend to quit

showering cash on investors anytime soon. company stock has tripled in the last six years. is set to buyell endeavor. blue barrel learning the company value declined because founder wants to retain a large quantity of mineral rights. in germany, chancellor angela merkel's government will increase borrowing by about 50% next year to accommodate refinancing of the nation's so-called bad bank fund set up during the financial crisis. it will also help bankrupt germany's the gift budget on record, it's focus on building digital infrastructure. that is the bloomberg business flash. tom: thank you so much. michael mckees,

and cameron crise of bloomberg. bring up the chart. the journal was that hedge fund article today on underperformance, back here the crisis. come on, camera. we are -- come on, cameron. we are nowhere near catharsis. >> it might just be the calendar, i've got to tell you. i really do feel like people are mentally just so scarred across assets. last couple of days we broke some support in the s&p that was just get me out. obviously a was a micro issue in terms of the move in february with the volatility strategies blowing up >> -- blowing up. tom: when you say get me out, it

is just a bunch of funny guys playing with their funny money while everyone else is in more conservative investments. >> to go back to what stands are can miller -- to what stantec what stan -- to , presidenter said trump has 56 million followers, most of whom are not financial market professionals. when they see the president saying the fed is making mistakes, how does that inform their expectations for a market return and for the economy? would make people more bearish and more cautious than they would be. i think it is probably a bad thing. if you are essentially and clampingear

down on the justification for what the monetary policy is isng, the natural assumption that is going to have bad consequences for the markets of the economy. what would you expect people to do. you would them to become more cautious. they would sell stocks. they would dial down what they are going to spend on the holidays. it can be something of a self-fulfilling prophecy in that regard. francine: consumers are a little bit more cautious, it means there's more debt out there. how much of a debt problem does the u.s. have? >> a rising debt problem, but not critical yet. corporate debt is the one area the fed has talked about theying, but in general see it is manageable on the private side. government debt is another question because as the u.s. ,ssues more and more treasuries

yields are going to have to go up in order to attract buyers. there's going to be an issue going forward with that. it hasn't quite hit yet. francine: thank you both, bloomberg's michael mckee and cameron crise. coming up on "bloomberg surveillance," galaxy digital's founder and ceo. when will be talking markets. this is bloomberg.

♪ no one is in a position to dictate to the chinese people what should or should not be done. francine: that was president xi's comments, and they weren't what investors were hoping for. no new initiatives were mentioned. still with us is bloomberg's cameron crise in new york. did president xi disappoint, or were the markets expecting too much? >> on the one hand, it should have been as expected. it was full of sweet boring -- full of sweeping rhetoric, full of party dogma. on the other hand, given the

backdrop being the context of the speech in an era of big the u.s. and china going at it eddie trade front, they were they hope that they would deal with trade issues, but it wasn't anything like that at all. indication where he plans to take the economy going forward other than that barb about pushing back about the way china will dictate policy and re-informing the party. why were the markets so disappointed? are they concerned that because china is stimulating internally, they can't push through reforms for the market? >> probably one constraint xi jinping had that the markets would have taken is they have two things going on for the moment. first of all, this important gathering of officials in beijing this week to set the

scene and the tone for the economy next year, including the growth target. president xi probably didn't want to front run any of that. reason heer hand, the is a little boxed in his because he can't show his hand too much. obviously there are some internal domestic considerations being looked at right now. i saw broader question and reporting as well, somebody was talking about a socialist government, or maybe a communist government. i don't know what it is. what is the flavor of xi authoritarianism? >> you only have to listen to his speech today and realize that is about putting the party at the center reference and -- at the center of everything and

re-informing the parties control of everything. whatever happened the last 40 years, the next 40 will be much tougher for time -- for china. there's an aging workforce. debt has ballooned. they are facing challenges that we expect for an economy as it develops. francine: thank you so much as always, enda curran. cameron crise will also be staying with us. we have more from our exclusive interview with stan druckenmiller. this is bloomberg.

bloomberg. bloomberg.

tom: bloomberg surveillance, the distractions of brexit and the market. no one in washington cares. it is shut down city.

we will talk about that in just a moment. firstou are reading your word news. >> michael flynn will be sentenced today for line two federal agents about his contacts with russia. it's likely he will walk out a free man because of his extensive cooperation with federal prosecutors in his lawyer was critical about fbi procedures. federal reserve policymakers are beginning attend a meeting. it will likely end with another interest rate increase. the president has been blasting the fed for thinking about a rate hike. i could not agree more, it would be horrific if the fed were to pause because they were bullied by donald trump. i also want to say it would be horrific if the fed didn't pause

because they were afraid people would think they were being bullied by donald trump. that would be just as political as the first outcome. >> the kremlin is rejecting reports it was behind the disinformation campaign on american social media. committee said they helped donald trump in 2016 and it was more wide reaching. spokesperson said they are trying to blame reservoir social tensions. will launchs rockets today. the companies include spacex, blue origin, and united launch. that is the joint venture between boeing and lockheed martin. falcon 9ll launch a rocket from cape canaveral.

global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom: the government shutdown will be expected. look,in our washington kevin's really, our chief washington correspondent. i don't know what day it is. shutdown on friday. once the likelihood it? kevin: there has to be some type of deal. number, theon president has said he doesn't want to have a short-term extension. they've got to get something through. people will receive backend payments, this is going to have a dramatic impact on people not getting a paycheck around the holidays. the sec can't launch new investigations during a shutdown. they are lining up all the

different legal actions. bring this up on president trump. tim o'brien is an expert on his finances. the trump organization, the trump family, the campaign, the transition, the white house, they are all being investigated. we are there, people are lining up not four or five nick sony and things, this is a long list. is his legal team overwhelmed? kevin: i think they are ready to break out. anytime his back is against the wall, they bulldoze their way out of it. get ready for that approach, especially nancy losey becoming the top democrat.

you somewhat perfect illustration with rudolph giuliani when he spoke on the sunday shows this weekend. does the how much inner circle talk about the changes in the white house. kevin: not much. staff withchief of something that was largely forecasted with the departure of john kelly. what interesting is the policy implications of mick mulvaney. he voted against raising the debt ceiling. he has a deep relationship with the freedom caucus. how is he going to work on issues like trade with steve mnuchin? beyond that, there is a lot coming down the pipeline. i mention the debt ceiling and the shutdown. nafta, that's and going to really escalate in the first quarter next year. tom: kevin, thank you.

we move on to new york. excellente washington. this is on the policy. let's switch parties. nancy pelosi, does her term start sooner if there is a shutdown? thethe congress comes in at beginning of january. it does not start sooner. charge,congress is in the old majority in both houses is in charge of the current negotiations. tom: how abruptly does it change for republicans on january 3. aat is the shift when majority chairman feels with the shifts to the minority.

to do. have a lot less if you're in the majority, you are in charge of planning hearings and agendas and trying to figure out how to move things across the chessboard. the minority party is playing black. there is a very fine line here, a small majority. the majority party chair for all his or her bravado at the beginning of the term will end up spending a lot of time herding cats, keeping all of their people together. could be arson disaster. they will spend a lot of time with that. francine: how do you think they will handle the u.s. trying to lobby their concerns of taking a big part of the german network. will we see this escalate?

>> i think you see it continue. the problem has been around for quite a long time. i think there is a great deal of bipartisan agreement, particularly on the intelligence committees they see a lot of the information other members don't. something needs to be done. know, those concerns are expanding in the u.k. and western europe and other places. i fully expect that to continue and that pressure to keep up. francine: how does the controversy actually play in the trade wars between china and the u.s.? >> that's a very good question. chinanited states and have taken some steps to segregate one from the other. that there are

some small indications of this. the chineseice response to this, they have really focused on canada and what cannot ought to be doing. states hashe united taken pains to describe this as a matter different from trade. we have had positive signals on trade. i expect those two tracks to remain distinct. tom: how do you define gridlock right now? have you seen this flavor of gridlock? once the new flavor of gridlock? >> in 2019, it's one where you have the majority party in the house and the majority party in the senate not agree on a lot instabilitynued going forward. an agreement on a number of different bipartisan priorities,

i include the ratification of nafta. you won't see a lot else. tom: well said. this isg to all of cameron. there are no greek letters involved. there is no output or gamma or derivatives. how you fold all of this in? >> it's tough. referring back to the don'tnmiller quit, they have an edge when it comes to playing politics. that is one of the issues. people who enter markets typically do so with an economics or quantitative background, not political science. people are reading option theory, not machiavellian. unfortunately, these divisions

are taking a precedent in determining price action. tom: you've got three bloomberg terminals on your desk, what are you going to watch for as we move to the open and as we open? i look at the dollar yen and oil a little bit. what is the thing you observe? looking atat i am today is the short end of the yield curve. there is a large speculative short in euro-dollar futures. they are betting interest rates are going up. that's been a constant all year. they arere seeing is getting squeezed pretty hard. essentially pricing in no rate hikes at all. there are some technical aspects

we won't go into. what is interesting, with all the kerfuffle about yield curves we've had for the last year or two, there is only one major .ield curve i look at that it's the second versus the sixth euro-dollar curve. this is great stuff. this is inverted. the second versus the sixth. versus june 20. basisk suggested every 10 points of flattening in the second versus the sixth is worth lower.3 basis points value on theadding second and the sixth euro-dollar curve.

: contract. tom: scarlet is leading our coverage and michael mckee will be in washington. we have some really really good guests. jeffrey rosenberg will be with us from blackrock. we will bring you a conversation with chairman greenspan. that is at 2:00 tomorrow. this is bloomberg. ♪

>> let the -- let's get the bloomberg business flash. the world second largest software maker is out with a strong sales forecast.

it signals they expect greater demand in its transition to cloud-based computing. it will increase up to 4% in the current quarter. they expect higher growth through the fiscal year. t-mobile has cleared a regulatory hurdle to take over sprint. billion, they knew approval from antitrust regulators and the fcc. warnednese telecom giant they will only hurt the industry. it's the first time anyone has spoken out since the u.s. itsuaded canada to arrest cfo over alleged violations of sanctions on iran. they would not address the case directly, but he challenged accusers worried about security to provide proof. that is the bloomberg business flash. francine: u.k. prime minister

has given another four weeks to save her brexit deal. she said it's the only way to avoid a chaotic split from the european union. join us is our government reporter. there are one million things going on. vote.n that confidence we thought she was safer. then jeremy corbyn said not so much. rob: that's what he said. what he did, the confidence motion, they are all slightly different, there is no reason anyone should feel bad. last week was a conservative party one. yesterday, it was a new sort. censure forion of her as prime minister. the thing about that is it's meaningless. there is an argument, if she

lost it, she would have to resign. there is no constitutional precedent through that. i don't think she would go without dynamite. francine: does it change her negotiation? this is the deal we have? there will be a vote january 14 and nothing else happens? rob: she is trying to get some more assurances from the eu. the eu has stopped negotiating. maybe she can shift some line in the deal. pretty much, the deal they will be voting on january 14 is the deal as it is now. that's kind of a problem. articles on ae 47 second referendum. we need you to chime in. do the remaining people just assume they would win? them do and they

shouldn't. a lot would depend on what the question is. they thought they would win last time. evidence that some people have shifted, more younger people who are more pro-remain have come onto the voting rolls. who were pro-leave, some of them have died. are things you can point at. it's not axiomatic at all. there is one argument that what she should do is have a second referendum in which it's her deal or stay. her deal might win. deal,were her deal or no that becomes the compromise. do you have three options? --e seen people say they

there are nine at ways of doing it. everybody has a view. francine: great. what is the real chance of this vote of this deal getting through parliament? is it higher than 15%? rob: i think there is no chance on the first round. she is running down the clock. if she runs down the clock enough, the attorney would be no deal. she could win a lot of labor mps at some point. if she makes it her deal or we stay, she could win some tories back. are getting into the weeds of exactly what mps vote for. this is bloomberg. ♪

tom: good morning, everyone. bloomberg surveillance. thank you for the coverage on manchester united.

we sort of flails away. we will get an important perspective in a moment. the single best chart, it's a special treat. we are going to go into a pro chart. we normally don't show this on tv. let's do it. this is the probability as the market season out three years. there's a lot of way to look at this. what you've got to see here is this amount above the probability, it's smaller than this amount down here. out shows the tilt as we go three years. how do you use something like that? cameron: i've never seen that. that's cool. that's pretty inevitable, that the dots are going to shift. the question is if you asked me two weeks ago, i would say we

would go from three to two. it feels like in real time, maybe we go to one next year. tom: it's the bell curve in the chart. if you pull it up, that shows the center. is everybody on the same believe? cameron: there is an acknowledgment that the top side has compressed. , peopleprobably gone are assessing the chance that the fed will be taking rates lower. we have flattened of the entire money market curve so there is almost nothing priced in terms of hikes at all. beyond that, we are pricing chances of cuts. tom: thank you so much. we always look forward to it.

we've got a lot more to talk about. we are thrilled to have jonathan ferro with this on radio. stock ofocus on the manchester united. everybody has an interest in the premier league. the way you construct these teams is something we will talk about. o'neill is scheduled to be with us. not only with fennec, but an important discussion about these markets, down 500. futures are now up 11. this is bloomberg. ♪ ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom.

♪ david: running for cover, they

hit the lowest close in 18 months. other stock indices go down with it. is it a correction? test,d his foot to the they meet with investors looking for some right of hope amid of hope amid the turmoil. china hang stuff. i says no one tells them what to do. they are trying to come to terms with president trump on trade. welcome to bloomberg daybreak. alix steel is off today. lisa: i want to get to some breaking news. frome getting results darden. they reported adjusted earnings $.92.are of the estimate was $.91. it is higher than estimates. comp sales at compared of stores were up 2.1%.